Countries and Regions

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p. 6 of 9 BACK | NEXT I. Development Situation II. Implementation of the Country Strategy and Program A. Poverty Reduction B. Thematic Priorities III. Portfolio Management Issues IV. Country Performance and Lending Level

Country Strategy and Program Update 2002-2004: Cook Islands : II. Implementation of the Country Strategy and Program

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A. Poverty Reduction

19. The Cook Islands has the highest level of human development and the second lowest poverty index among ADB's pacific developing member countries² (Appendix 2). This means that nearly all Cook Islanders have a good standard of living. But income and socioeconomic discrepancies between Rarotonga and the outer islands are significant and have triggered internal migration from the outer islands to Rarotonga, and external migration from Rarotonga and the outer islands to New Zealand.

20. Financial mismanagement in the early 1990s precipitated a fiscal and external debt crisis, which led to public sector restructuring in 1996-1997. The number of public sector employees was halved. Widespread unemployment was averted by emigration to New Zealand, to which Cook Islanders have free access. In fact, emigration is increasing to the point where the Cook Islands population has fallen to its lowest levels since the 1970s.

21. Credit access in the outer islands has improved. In 1997, 10 percent of all loan approvals-representing 37 percent by value of approvals-were for the outer islands. Most of the loans were to tourist operators and black pearl farmers.

22. Many Cook Islanders who choose to emigrate see the New Zealand social welfare system as a social safety net. Migrants who are employed in New Zealand can avail themselves of New Zealand retirement benefits even if they return to the Cook Islands.

23. Another social safety net is the culture of providing support to extended families thus ensuring that food is redistributed. Formal Government safety nets are in the form of child benefits and old age benefits amounting to about 4 percent of the income of the lowest quartile income group.

24. To address the socioeconomic discrepancies between Rarotonga and the outer islands, ADB will finance a loan for outer islands development in 2003. It will be a program loan and will establish an outer islands trust fund whose proceeds will finance development projects and maintenance of infrastructure in the outer islands. The loan will have a finance component to assist in fostering private enterprise.

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